Gift Tax

Gift taxes exist mainly to stop people avoiding inheritance or estate taxes by giving their wealth away before they die. Countries handle this in different ways.

In the United States, the person giving the gift is responsible for any gift tax. Each giver can give up to an annual amount per recipient without any reporting, and larger gifts count against a combined lifetime allowance shared with the estate tax. In practice, most people never pay gift tax.

Other countries tax the recipient instead, or have no separate gift tax but treat gifts made shortly before death as part of the estate. In the United Kingdom, for example, many gifts become free of inheritance tax if the giver survives for seven years.

For example, a parent who gives a child money for a house deposit may need to check whether the gift must be reported, whether it uses up any allowance and whether it could be taxed if the parent dies soon afterwards.

Gifts to spouses and charities are commonly exempt. Because the rules and allowances change, current limits should be checked with the tax authority.